Exam 8: Managing Inventory

The new medical supply discounter, Life Alert Inc., provides a certain type of titanium stent which costs $5,000. The annual holding cost rate is 25 percent, annual demand is 600, and the order cost is $200 per order. The lead time is 3 days. Because demand is variable (the patients may not always be ready for surgery), Life Alert has decided to establish a customer service level of 95 percent. The distributor is open 300 days per year. A) What is the optimal order quantity? B) What is the safety stock? C) What is the reorder point?

In the basic EOQ model, if the annual demand increases by nine times and all other values remain constant, the EOQ will

The typical inventory model is concerned with answering the two most basic questions, which are

An increase in inventory turnover is bad news for the manufacturer or retailer.

Comfort Stayz Inns orders miniature shampoos for guest bathrooms on a periodic basis. Based on convenience, it decides to review its stockroom inventory of these shampoos every four weeks. The shampoo supplier takes nine days to supply an order. The hotel observes that the average daily demand for the shampoos is 50 per day, with a standard deviation of 6 shampoos. It wishes to maintain an average CSL of 95 percent for this product. What is the TIP?

XYZ Computing has been trying to reduce their inventory holding costs. Which of the following practices would not help them achieve this goal?

Businesses carry inventory because of the certainty of demand.

The availability of substitute products lowers the cost of stock-outs.

Identify and discuss two recent trends in inventory management.

The periodic review model works best for A category items (in ABC analysis) because those items tend to move the fastest.

The purpose of safety stock is to

The objective of the basic economic order quantity model is to

ABC analysis classifies on-hand inventory into three categories based upon the

The _________ model recommends a specific (recurring) order quantity that minimizes the sum of holding cost and ordering cost.

Lot-for-lot (LFL) and flat ordering are two inventory order size recommendation policies.

Which of the following statements regarding the reorder point (ROP) model is true?

Indirect costs of holding inventory include risk of product obsolescence, stifling of innovation, and clutter and disorganization.

Perishable inventory requires

The need for inventory lessens as the uncertainty in future demand, prices, and product availability diminishes.

Which of the following is not true of inventory management?